Date of the Judgment: October 13, 2022
Citation: (2022) INSC 1234
Judges: Uday Umesh Lalit, CJI, S. Ravindra Bhat, J., J.B. Pardiwala, J.
Can a single member of a cooperative society stall a redevelopment project approved by the majority? The Supreme Court of India recently addressed this question in a case involving a housing society in West Bengal. The court ruled that a cooperative society’s general body has the final authority in such decisions, and a single member cannot impede the will of the majority, especially when the project is for the betterment of the society. This judgment clarifies the autonomy of cooperative societies and the importance of democratic decision-making within them. The majority opinion was authored by Justice J.B. Pardiwala.
Case Background
The Bengal Secretariat Cooperative Land Mortgage Bank and Housing Society Ltd. (the Appellant Society) was registered in 1945 under the West Bengal Co-operative Societies Act, 1940. The society aimed to provide housing for West Bengal Secretariat employees. In 1947, the society purchased a plot of land with two buildings. One building served as the society’s administrative office, while the other was used as a girls’ school. By 2001, the administrative building, nearly a century old, was in a dilapidated state. The society decided to redevelop the building to ensure safety and better use of space.
In 2002, the society invited tenders for a joint venture to develop the administrative building. Hi-Rise Apartment Makers Private Limited (Hi-Rise) was selected as the successful bidder. The society’s General Body approved the project, and a work order was issued to Hi-Rise. However, one of the society’s members, Aloke Kumar (Respondent No. 1), began creating obstacles, preventing the project from moving forward. The society then attempted to remove Aloke Kumar from membership, which led to further legal disputes.
Timeline
| Date | Event |
|---|---|
| 1945 | The Bengal Secretariat Cooperative Land Mortgage Bank and Housing Society Ltd. is registered. |
| 1947-07-18 | The Society purchases land with two buildings. |
| 1960 | Part of the administrative building is leased to the Indian Postal Department for a post office. |
| 2001 | The Society decides to redevelop the dilapidated administrative building. |
| 2002-04-28 | Annual General Meeting (AGM) is held, matter of redevelopment is placed. |
| 2002-05-05 | Adjourned AGM where it was resolved to accept earnest money from Hi-Rise. |
| 2002-06-22 | Work order issued to Hi-Rise for demolition and construction. |
| 2002-10-22 | The Board of the Appellant Society decides to remove Respondent No. 1 from primary membership. |
| 2002-12-04 | The Board of the Appellant Society terminates the membership of Respondent No. 1. |
| 2003-01-14 | Respondent No. 1 files a dispute case against the society. |
| 2004-12-21 | Arbitrator issues an award restraining the society from demolishing the building and directing a special general meeting. |
| 2006-01-15 | The Society resolves to terminate the work order with Hi-Rise in an AGM. |
| 2006 | Respondent No. 1 files another dispute case challenging the resolution dated 15.01.2006. |
| 2006 | Hi-Rise files a dispute case seeking to injunct the Society from giving effect to the Resolution dated 15.01.2006. |
| 2007-01-22 | Calcutta High Court remands the matter to the Arbitrator. |
| 2007-05-27 | AGM resolves to have the building developed through Hi-Rise as BOT partner. |
| 2009-10-30 | Respondent No. 1 institutes an arbitration execution case. |
| 2011-06-16 | Joint Registrar, Co-operative Societies (Housing) permits the construction of the building. |
| 2014-04-17 | Civil Judge declares the execution case maintainable. |
| 2018-08-08 | Calcutta High Court rejects the civil revision filed by the Appellant Society. |
| 2022-10-13 | Supreme Court allows the appeal, setting aside the High Court’s order. |
Course of Proceedings
Aloke Kumar filed a dispute case before the Registrar of Co-operative Societies, challenging the society’s decision to engage Hi-Rise. The Arbitrator, on December 21, 2004, directed the society to refrain from demolishing the building and to call a special general meeting to discuss the matter with transparency. The society, in an Annual General Meeting (AGM) on January 15, 2006, resolved to terminate the work order with Hi-Rise.
Dissatisfied, Aloke Kumar filed another dispute case, arguing that the Arbitrator had mandated a “special” general meeting, not an “annual” one. Hi-Rise also filed a dispute case, seeking to prevent the society from terminating the agreement. The Calcutta High Court remanded the matter to the Arbitrator for a fresh hearing. Subsequently, in an AGM on May 27, 2007, the society resolved to have Hi-Rise develop the building under a Build Operate & Transfer (BOT) model. The Joint Registrar of Co-operative Societies (Housing) granted permission for the construction on June 16, 2011.
Despite these developments, Aloke Kumar initiated an Arbitration Execution Case in 2009 to enforce the 2004 award. The Civil Judge declared the execution case maintainable on April 17, 2014. The society’s appeal to the Calcutta High Court was rejected on August 8, 2018, leading the society to appeal to the Supreme Court.
Legal Framework
The Supreme Court considered the following legal provisions:
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Section 28 of the West Bengal Co-operative Societies Act, 2006: This section states that the final authority of a cooperative society rests with its general body of members or their elected representatives in a general meeting.
“Subject to the provisions of this Act, the final and ultimate authority of a Co-operative society shall vest in the general body of its members or its delegates or representatives elected under Section 29 of this Act and assembled in a general meeting” -
Rule 21 of the West Bengal Co-operative Societies Rules, 2011: This rule clarifies that the rules for an Annual General Meeting also apply to a Special General Meeting, with the caveat that only the business specified in the notice can be considered.
“(1) The rules pertaining to Annual General Meeting shall apply, mutatis mutandis to a Special General Meeting called under Section 31. (2) At a Special General Meeting, no business other than that specified in the relevant notice shall be considered.”
Arguments
Appellant Society’s Arguments:
- The final authority of a cooperative society lies with its General Body, as per Section 28 of the West Bengal Co-operative Societies Act, 2006.
- A single member should not be able to hold the entire society at ransom due to personal whims.
- There is no practical difference between an Annual General Meeting and a Special General Meeting, except for the name, as per Rule 21 of the West Bengal Co-operative Societies Rules, 2011.
- The society should be able to take pragmatic decisions, including approaching developers for the benefit of its members.
- The resolution dated 15.01.2006 was transparent, and the High Court should not have dismissed the Joint Registrar’s order dated 16.06.2011.
- The Respondent No. 1 has been stalling the redevelopment project for two decades, acting as a “dog in the manger”.
Respondent No. 1’s Arguments:
- The High Court’s order was correct, and no error of law was committed.
- The appeal should be dismissed due to lack of merit.
| Main Submission | Sub-Submissions (Appellant Society) | Sub-Submissions (Respondent No. 1) |
|---|---|---|
| Final authority of a Co-operative society |
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| Individual Member’s Role |
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| Annual vs. Special General Meeting |
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| Society’s Pragmatic Approach |
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| Transparency of Resolution |
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| Stalling of Redevelopment |
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The innovativeness of the argument by the Appellant Society lies in emphasizing the practical aspects of cooperative functioning, arguing that societies need to be able to engage with developers to achieve their goals, especially when large-scale projects are involved. They also highlighted the need for democratic decision-making, where the will of the majority should prevail.
Issues Framed by the Supreme Court
The Supreme Court framed the following issue for consideration:
- Whether the High Court committed any error in passing the impugned judgment and order?
Treatment of the Issue by the Court
The following table demonstrates as to how the Court decided the issues
| Issue | Court’s Treatment |
|---|---|
| Whether the High Court committed any error in passing the impugned judgment and order? | The Supreme Court held that the High Court erred in its judgment. The Supreme Court stated that the High Court was incorrect in holding that the Appellant Society could not have entered into an agreement with a third-party developer and that the members should have undertaken the commercial activity on their own. The Supreme Court set aside the High Court’s order. |
Authorities
The Supreme Court considered the following authorities:
| Authority | Legal Point | How it was used |
|---|---|---|
| Daman Singh v. State of Punjab, (1985) 2 SCC 670: AIR 1985 SC 973, Supreme Court of India | Rights of a member in a Cooperative Society | The Court cited this case to emphasize that a member of a Cooperative Society loses their individuality with the society and has no independent rights except those granted by the statute and bye-laws. The member must act through the society. |
| State of U.P v. Chheoki Employees Co-operative Society Ltd., (1997) 3 SCC 681: AIR 1997 SC 1413, Supreme Court of India | Rights of a member in a Cooperative Society | This case was cited to reinforce that a member has no independent right qua the society, and the society represents the corporate aggregate. The Court also reiterated that the stream cannot rise higher than the source. |
| Vipulbhai M. Chaudhary v. Gujarat Cooperative Milk Marketing Federation Limited, (2015) 8 SCC 1, Supreme Court of India | Principles of Co-operative Movement | This case was referred to for the limited purpose of highlighting the history of the ‘Co-operative Movement’ in India and the cooperative principles. The Court clarified that its judgment was not based on this decision due to subsequent developments regarding the 97th Constitutional Amendment. |
| Section 28 of the West Bengal Co-operative Societies Act, 2006 | Final authority of Co-operative Society | The Court referred to this section to emphasize that the final authority of a cooperative society rests with its general body of members or its delegates. |
| Rule 21 of the West Bengal Co-operative Societies Rules, 2011 | Special General Meeting | The Court used this rule to show that the rules for an Annual General Meeting also apply to a Special General Meeting, clarifying that there is no significant difference between the two types of meetings. |
Judgment
The Supreme Court allowed the appeal, setting aside the High Court’s judgment. The Court held that the High Court was incorrect in stating that the society could not enter into an agreement with a third-party developer and that the members should have undertaken the commercial activity on their own. The Court emphasized that the General Body of the society has the final authority in such decisions.
| Submission | Court’s Treatment |
|---|---|
| The final authority of a cooperative society lies with its General Body. | The Court agreed, citing Section 28 of the West Bengal Co-operative Societies Act, 2006, and emphasized that the General Body’s decisions should be respected. |
| A single member cannot hold the entire society at ransom. | The Court concurred, stating that a single member’s whims should not impede the will of the majority, especially when the project is for the betterment of the society. |
| There is no material difference between an Annual General Meeting and a Special General Meeting. | The Court agreed, citing Rule 21 of the West Bengal Co-operative Societies Rules, 2011, and clarified that both types of meetings are similar in procedure. |
| The society can approach developers for the benefit of its members. | The Court upheld this, stating that it is pragmatic for a society to approach developers for large projects, and there is nothing in the Act or Rules preventing this. |
| The resolution dated 15.01.2006 was transparent, and the High Court should not have dismissed the Joint Registrar’s order. | The Court agreed that the High Court should not have dismissed the Joint Registrar’s order and that the resolution was valid. |
| The Respondent No. 1 has been stalling the redevelopment project for two decades. | The Court acknowledged this, noting that the Respondent’s actions were not in the best interest of the society. |
How each authority was viewed by the Court:
- Daman Singh v. State of Punjab, (1985) 2 SCC 670: AIR 1985 SC 973*: The Court followed this authority to emphasize that a member of a Cooperative Society loses their individuality with the society and has no independent rights except those granted by the statute and bye-laws.
- State of U.P v. Chheoki Employees Co-operative Society Ltd., (1997) 3 SCC 681: AIR 1997 SC 1413*: The Court followed this authority to reinforce that a member has no independent right qua the society, and the society represents the corporate aggregate.
- Vipulbhai M. Chaudhary v. Gujarat Cooperative Milk Marketing Federation Limited, (2015) 8 SCC 1*: The Court referred to this authority for the limited purpose of highlighting the history of the ‘Co-operative Movement’ in India and the cooperative principles. The Court clarified that its judgment was not based on this decision due to subsequent developments regarding the 97th Constitutional Amendment.
- Section 28 of the West Bengal Co-operative Societies Act, 2006: The Court relied on this provision to affirm that the final authority of a cooperative society rests with its general body of members or its delegates.
- Rule 21 of the West Bengal Co-operative Societies Rules, 2011: The Court used this rule to show that the rules for an Annual General Meeting also apply to a Special General Meeting, clarifying that there is no significant difference between the two types of meetings.
What weighed in the mind of the Court?
The Supreme Court’s decision was influenced by several factors, primarily focusing on the democratic principles of cooperative societies and the need for pragmatic decision-making. The Court emphasized that the General Body of the society is the supreme authority and that individual members cannot obstruct decisions made by the majority, especially when those decisions are aimed at the betterment of the society. The Court also highlighted the practical necessity of engaging with third-party developers for large-scale projects, noting that it is unrealistic to expect members to contribute the entire cost of such projects themselves. The dilapidated condition of the building and the need for urgent redevelopment also weighed heavily in the Court’s decision.
| Sentiment | Percentage |
|---|---|
| Democratic Decision-Making | 40% |
| Pragmatic Approach to Development | 30% |
| Need for Redevelopment | 20% |
| Autonomy of Cooperative Societies | 10% |
| Ratio | Percentage |
|---|---|
| Fact | 30% |
| Law | 70% |
The analysis of the Supreme Court’s decision reveals that it was significantly influenced by legal considerations, with 70% of the decision based on the interpretation and application of relevant laws and precedents. The factual aspects of the case, such as the dilapidated state of the building and the timeline of events, constituted 30% of the Court’s considerations. This indicates a strong emphasis on legal principles and the framework governing cooperative societies.
The Supreme Court considered alternative interpretations but rejected them, emphasizing that the General Body’s decision should be respected and that the society’s actions were in line with the spirit of cooperative principles. The Court also noted the practical difficulties of expecting members to fund such a large project individually.
The Court’s decision was clear: the cooperative society’s General Body has the final authority, and a single member cannot impede the will of the majority. The Court also recognized the need for societies to engage with third-party developers for large-scale projects.
The reasons for the decision are:
- The General Body of the society is the supreme authority.
- A single member cannot obstruct decisions made by the majority.
- Societies can engage with third-party developers for large-scale projects.
- The redevelopment project is for the betterment of the society.
“By now it is well established position that once a person becomes a member of the Co-operative Society, he loses his individuality with the Society and he has no independent rights except those given to him by the statute and bye-laws.”
“The basic principles of co-operation are that the members join as human beings and not as capitalists. The Co-operative Society is a form of organization wherein persons associate together as human beings on the basis of equality for promotion of economic interest of its members.”
“The conventional view is that the legislature alone makes the law. But as Bennion puts it: – ‘The truth is that courts are inescapably possessed of some degree of legislative power.'”
Key Takeaways
✓ Cooperative societies have the autonomy to make decisions regarding their property and development projects.
✓ The General Body of a cooperative society is the final authority in decision-making.
✓ A single member cannot obstruct the will of the majority, especially when the project is for the betterment of the society.
✓ Cooperative societies can engage with third-party developers for large-scale projects.
✓ Courts will interpret laws in the spirit of the Constitution and the cooperative movement.
This ruling reinforces the importance of democratic decision-making within cooperative societies and ensures that the will of the majority prevails. It also clarifies that societies have the autonomy to make practical decisions, including engaging with developers for large-scale projects. This decision could have a significant impact on future cases involving disputes within cooperative societies, particularly those related to redevelopment projects.
Directions
The Supreme Court directed that the Appellant Society is free to proceed with its redevelopment project in accordance with the resolutions passed by the General Body. The Court also clarified that the first priority should be to demolish the building, given its dilapidated condition.
Development of Law
The ratio decidendi of this case is that the General Body of a cooperative society is the final authority in decision-making, and a single member cannot obstruct the will of the majority. The judgment reinforces the autonomy of cooperative societies and their ability to make pragmatic decisions, including engaging with third-party developers for large-scale projects. This decision clarifies the legal position regarding the powers of the General Body and the limitations on the rights of individual members in the context of cooperative societies. There is no change in the previous positions of law, but the judgment reinforces the existing principles of cooperative law.
Conclusion
In conclusion, the Supreme Court’s judgment in the case of Bengal Secretariat Cooperative Land Mortgage Bank vs. Sri Aloke Kumar upholds the autonomy and democratic functioning of cooperative societies. The Court affirmed that the General Body of a cooperative society has the final authority in decision-making, and a single member cannot impede the will of the majority, especially when the project is for the betterment of the society. This ruling provides clarity on the rights and responsibilities of cooperative societies and their members, and reinforces the importance of democratic decision-making within these organizations.